Permit Markets, Seller Cartels and the Impact of Strategic Buyers

Godal Odd () and Frode Meland
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Godal Odd: University of Bergen

The B.E. Journal of Economic Analysis & Policy, 2010, vol. 10, issue 1, 33

Abstract: The literature on emissions trading and strategic behavior under the Kyoto Protocol typically claims that a sellers' cartel featuring countries of the former Soviet Union can be quite profitable for its members. Using a Cournot-type quota exchange model, we show that this conclusion is sensitive to the assumption that large permit buyers, like the EU and Japan, are supposed to behave as price takers. Our result is driven by the same mechanisms as those found in Salant, Switzer and Reynolds (1983). We also discuss alternative models of permit exchange.

Keywords: emissions trading; Kyoto Protocol; cartel formation; merger profitability (search for similar items in EconPapers)
Date: 2010
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DOI: 10.2202/1935-1682.2397

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